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Transfer on Death Deed: Is It as Easy as It Sounds?

On Behalf of | Feb 5, 2023 | Healthcare Directive

Transfer on Death Deed: Is It as Easy as It Sounds?

You may have heard of the California Transfer on Death Deed (T.O.D.), which, if properly executed, allows a property to transfer to the named beneficiary(ies) upon the death of the current owner. That sounds simple, right? In theory, it is simple. But in practice, it can be far more challenging than you think.

The reason that the transfer may be more difficult than the name implies is because the law requires a waiting period of 120 days before the property can be sold. This waiting period must be accompanied by a specific document which serves as notice to the deceased’s heirs and must include a copy of the Transfer on Death deed as well as the death certificate for the decedent. Subsequently, an affidavit verifying that heirs have been notified must be recorded in the county in which the property is situated.

During this time, the decedent’s assets, such as checking and savings accounts, are typically inaccessible. Therefore, the mortgage, property taxes and any other debt associated with the property must be paid with the beneficiary’s own funds. For many, paying their own mortgage, along with the mortgage of the deceased, is an impossible financial burden which cannot be sustained for the requisite four months.

Be mindful of a few additional potential pitfalls when executing a Transfer on Death deed:

Joint Title supersedes a Transfer on Death Deed

If you jointly own a property with someone, when you die, the other joint title owner will become the sole owner of the property, even if there is a Transfer on Death deed that has been properly recorded. Most married couples hold property in joint title or as community property, both of which will supersede any transfer-on-death deed that either spouse may record.

Complications Arise with a Minor Beneficiary

If you leave your home to a minor, a court-appointed custodian will need to be appointed to manage the property until the child turns 18. At the age of 18, your child will become the owner of the home. Let’s be honest – there aren’t many 18-year-olds who are ready for the responsibilities of home ownership.

Selling the Property May be Difficult

Unfortunately, when title is transferred through a Transfer on Death deed, title companies are often hesitant to insure clear title until three years after the transfer date. In this case, your home cannot be sold or mortgaged for three years.

Heirs at Law Could Put a Wrench in Your Plans

There may be people closely (or distantly) related to you who have a right to the property if you pass away. These people are termed “heirs at law”. According to California probate code, this can include biological and adopted children, half-siblings, parents, nieces, nephews and even aunts and uncles, depending on who survives you.

California Probate Code § § 6400-6414

For most Californians, a comprehensive estate plan which includes a Will, Trust, and documents such as Power of Attorney and Advance Medical Directive, provides a more effective means of transferring your wealth and property at the end of life.

Before you rely on a Transfer on Death deed or any other estate planning strategy, consult a competent attorney.